What is the risk of applying a countywide price trend to a specific neighborhood?
Correct Answer
B) Submarkets can move differently from the aggregate
Competitive submarkets can differ from a county-wide aggregate. Verify that the chosen trend represents the subject’s relevant property segment, dates and conditions. More geographically specific data can help but may be sparse or biased; select suitable support rather than mechanically preferring the smallest boundary. County trends are not categorically forbidden and are not necessarily smaller in magnitude.
Why This Is the Correct Answer
Option B is correct because competitive submarkets can move differently from a countywide aggregate. Different segments of the market tend to change in value at different rates, so the appraiser should verify that the chosen trend fits the subject's property segment, dates and conditions.
Why the Other Options Are Wrong
Option A: County data is generally recorded less accurately
Option A says county data is generally recorded less accurately. Nothing indicates countywide data are less accurate in general; the issue is whether the aggregate trend applies to the subject's neighborhood.
Option C: County trends may not be cited in appraisal reports
Option C says county trends may not be cited in appraisal reports. County trends are not categorically prohibited; they can be cited when they are shown to be relevant to the subject.
Option D: Aggregate trends are smaller in magnitude
Option D says aggregate trends are smaller in magnitude. A countywide trend can be larger or smaller than a neighborhood's; the risk is that it differs, not that it is smaller.
The county is not the neighborhood
A county average blends many neighborhoods, so your subject's street may be rising, flat or falling compared with it.
How to use: Use this when a question asks about applying a broad trend to a specific area.
Exam Tip
Prefer answers recognizing that submarkets can differ from broad averages; avoid answers claiming broad data are banned or necessarily smaller.
Common Mistakes to Avoid
- -Applying a countywide trend without checking the subject's submarket
- -Assuming the smallest geographic area is the most reliable source by default
- -Believing county-level data cannot be used in a report
Concept Deep Dive
Analysis
This question tests awareness that broad market trends may not fit a specific submarket. Different neighborhoods and property types can change in value at different rates. Applying a countywide figure without checking can misstate the subject's market conditions.
Background Knowledge
Time adjustments should be made by geographic area and property type, because different market segments change in value at different rates. More localized data can be more relevant but may be sparse or less reliable. Appraisers balance relevance and reliability rather than mechanically picking the smallest area.
Real-World Application
Countywide data show prices up 6% over the year, but sales in the subject's neighborhood, affected by new construction nearby, have been flat. The appraiser supports the market conditions adjustment with neighborhood sales and explains the difference in the report.
More Statistics Questions
Sale prices are $270,000, $290,000, $300,000, $310,000, $330,000. Treat the listed observations as the complete population and divide by n when computing the standard deviation. Report to the nearest dollar.
A sales sampling frame systematically excludes a relevant part of the target market. What is the principal risk?
An appraiser estimates a market-wide price trend using only sales data from one brokerage that specializes in luxury homes, without checking how other segments are represented. What is the principal concern?
Compared with analyzing one matched sale pair for one feature, what can a suitably specified multiple regression do?
The base-period median sale price is $400,000 and the current-period median is $460,000. Compute the price relative defined as current ÷ base, as a decimal to three places.
The assessment-to-sale ratios are 0.8, 0.85, 0.9, 0.92, 0.95, 0.98, 1.02, 1.05, 1.08, 1.1, 1.15, 1.2. Calculate COD as [average absolute deviation from the median ÷ median]×100. For even n, average the two middle ratios. Report the COD as a percentage to two decimals.
Assessment-to-sale ratios are 0.94, 0.96, 0.98, 1, 1.01. Compute the arithmetic mean. Report as a decimal ratio to three places.
Market data show a first quartile sale price of $405,000 and a third quartile sale price of $495,000. What is the interquartile range, to the nearest dollar?
Assessment-to-sale ratios are 0.96, 0.98, 0.99, 1.01. Compute the arithmetic mean. Report as a decimal ratio to three places.
Given first quartile $400,000, median $440,000 and third quartile $500,000, compute the trimean (Q1+2×median+Q3)/4. Report to the nearest dollar.
People Also Study
Real Estate Market
13.6% of exam
Property Description
11.8% of exam
Land or Site Valuation
4.5% of exam
Sales Comparison Approach
16.4% of exam
Cost Approach
13.6% of exam